1.

Walmart (in millions of USD) 2012 2013 2014 2015 2016 2017 2018

Operating Income (Loss) 26,675.0 27,725.0 27,882.2 27,396.5 23,951.2 22,476.7 22,892.3

Total Assets 193,406. 203,105.0 204,751.0 203,490.0 199,581.0 198,825.0 204,522.0

0

Total Equity 75,761.0 81,738.0 81,339.0 85,937.0 83,611.0 80,535.0 80,822.0

Interest Expense, Net 2,159.0 2,063.0 2,216.0 2,348.0 2,467.0 2,267.0 2,178.0

LT Debt 38,748.0 34,454.0 38,491.0 39,645.0 40,386.0 38,809.0 32,784.0

Net Income Avail to 15,936.0 16,947.0 16,534.6 16,240.2 14,143.6 13,456.3 13,293.4
Common, Adj

Total Cash Common 5,051.6 5,361.0 6,100.0 6,185.0 6,294.0 6,216.0 6,124.0
Dividends
Target (in millions of USD) 2012 2013 2014 2015 2016 2017 2018

Operating Income (Loss) 5,322.0 5,210.0 4,860.0 4,709.0 5,126.0 4,961.9 4,307.0

Total Assets 46,630.0 48,163.0 44,553.0 41,172.0 40,262.0 37,431.0 38,999.0

Total Equity 15,821.0 16,558.0 16,231.0 13,997.0 12,957.0 10,953.0 11,709.0

Interest Expense, Net 779.0 762.0 1,049.0 882.0 607.0 1,004.0 666.0

LT Debt 13,697.0 14,654.0 11,429.0 12,634.0 11,945.0 11,031.0 11,317.0

Net Income Avail to Common, Adj 2,985.6 2,834.7 2,753.7 2,699.0 2,970.0 2,914.4 2,591.0

Total Cash Common Dividends 777.0 903.0 1,051.0 1,273.0 1,378.0 1,359.0 1,356.0
b)

c)

Current Ratio of Target = 0.95

Current Ratio of Walmart = 0.76

Target has higher current ratio which means it is more liquid in comparison to Walmart, however with this ratio we don’t know
whether the current assets are lying in terms of slow moving inventory or hard cash ( which may affect converting current assets into
liquid). Also, high current ratio ​indicates an inefficient use of cash and other short-term assets. Absent some extraordinary
circumstances, we would expect to see a current ratio of at least 1 because a current ratio of less than 1 would mean that net
working capital (current assets less current liabilities) is negative. This would be unusual in a healthy frm, at least for most types of
businesses. The current ratio, like any ratio, is affected by various types of transactions. For example, suppose the frm borrows over
the long term to raise money. The short-run effect would be an increase in cash from the issue proceeds and an increase in
long-term debt. Current liabilities would not be affected, so the current ratio would rise.
In our case, Target may be borrowing over long term to raise money thus increasing its current assets.
 ​Total Debt/Total Assets of Target = 29.71 %
Total Debt/Total Assets of Walmart = 20.75 %
Target has higher Debt to assets ratio means higher percentage of assets are financed by creditors, debt or liabilities as compared
to Walmart. ​The higher the ratio, the higher the degree of leverage (DoL) and, consequently, financial risk. Return on equity will be
more for companies financed heavily by debt as equity financing will be low. In this case, Target has lesser equity financing as
compared to Walmart.

2.
a, b )

Income Statement

Change

SALES 1393500 1672200 278700

COSTS 1084500 1301400 216900

OTHER EX 28500 34200 5700

EBIT 280500 336600 56100

INTEREST PAID 21000 21000 0

TAXABLE INCOME 259500 315600 56100

TAXES @35% 90825 110460 19635

NET INCOME 168675 205140 36465

DIVIDENDS 50603

ADD TO RET EARN 118073

The external financing needed can either be from retained earnings or from dividends
C) ​$278,700 = Cash flow generated by operations ($278,700 earnings + $0 depreciation)

-$12,780 = Change in working capital ( Change in Current Liability (25500)- Change

in Current Assets(38280))

-$123,900 = Fixed assets ($123,900 change in net fixed assets)

$142,020 = Cash flow from assets

Qn3

What is the future value of a $40,000 investment after 25 years if the annual rate of return on
the investment is 2.5%?

PV= 40,000
time= 25 years
Rate= 2.5%

Future Value = 74157.76

4. Suppose the above $40,000 investment grows to $120,000 after 20 years. What annual rate
of return has been earned?

PV= 40,000
time= 20 years
Future Value = 120,000

Rate= 5.65%

5. Another investment opportunity has come along. It will require a $150,000 investment and it
promises to provide a safe total return of $225,000 after 12 years. The market rate of interest for
12-year securities is 3% per year. Is this a good investment? Explain.

This investment opportunity provides interest rate of 3.44% whereas the prevalent market rate is
3%. Thus, this is a good investment.
6. You invest $100,000 today in a new venture. It is projected that the new venture will earn
10% per year for the next 5 years and then 8% per year for the following 4 years. What will be
the value of your investment after 9 years?

For the first 5 years,

Rate = 10%/annum
PV = 100,000

So, FV at the end of 5th year= 161,051 & this becomes the PV for the computation of FV at the
end of next 4 years.

PV =161,051
Rate= 8%
Time=4 years

Value at the end of whole time period = 219,108.11